Gov't Fossil Fuel Subsidies More Than Twice Those to Clean Energy

by Emily Gertz

categories: Clean Energy, Fossil Energy, Greenhouse Gas, Jobs & Economy, Policy & Legislation

Published September 29, 2009 @ 01:20PM PT

For every dollar that the federal government spent on renewable energies between 2002 and 2008, it put about $2.43 -- nearly two and a half times as much -- into subsidies for fossil fuels.

As detailed in a new report, "Estimating U.S. Government Subsidies to Energy Sources: 2002-2008," this enormously tilted playing field gives quite a marketplace advantage to companies that are already among the most lucrative on Earth.

These figures suck a lot of the oxygen out of the argument that renewables are "just too expensive" compared to fossil fuels.  And they add some frisson to the sole, rather wonkish climate action that came out of last week's G20 Summit, where the heads of state agreed (albeit with no timeline yet established) to phase out fossil fuel subsidies.

If they follow through, it will be a move with climate benefits and more.   "Fossil fuel subsidies act as a drag on the whole economy," Columbia professor Scott Barrett, an expert on natural resource economics, told me last week.  "Get rid of them, and you can reallocate resources across whole economy," he said, "become more efficient, and ultimately [improve] the whole economy."

This graphic tells nearly the whole story; more detail of where those monies are going after the jump.

As detailed in the new report from the Environmental Law Institute and the Woodrow Wilson International Center for Scholars, the government spent $72.5 billion over those years to support the fossil energy sector, "a mature, developed industry that has enjoyed government support for many years." Renewable energy, "a relatively young and developing industry," clocked in at a mere $29.0 billion over the same span.

According to the study, $53.9 billion of the fossil fuel subsidies came in the form of tax breaks, -- virtually permanent sweeteners written into the tax code -- as well as $7.049 billion in reduced revenues from energy development leases on public lands. (These lease breaks were mandated by Congress.) $16.3 billion was in direct spending on a variety of programs and fuel reserves.

Renewables subsidies, meanwhile, came largely in the form of "time-limited initiatives implemented through energy bills, with expiration dates that limit their usefulness to the renewables industry." $16.8 billion went to corn ethanol, which is not a particularly climate-friendly fuel. $2.3 billion went into carbon capture-and-storage projects, which are wholly in the research and testing stage. That left $12.2 billion for "traditional renewables" including wind, solar, biomass, hydropower, and geothermal energy production.

"Conservatives, of course, don't want to acknowledge that tax breaks are subsidies," writes Dave Roberts at Grist. "They want to call them 'incentives' and accuse anyone who proposes repealing them of 'raising taxes.'

...Industry takes the same line. Jack Gerard, head of the American Petroleum Institute, is outraged anyone would call into question his precious subsidies incentives. Based on his statement, his defense is that, well, taxpayers get a good bargain for all those subsidies!

Fossil fuel subsidies drain resources from the economy.  They help keep fossil energy costs artificially low for consumers and industry, encouraging us to favor greenhouse-gas-producing fuels over their less subsidized clean competitors.  That in turn chills the financial environment for development of cleaner energy technologies.  Since the impacts of climate change are not (yet) factored into what we pay for dirty energy, either, it's reasonable to conclude that what we now pay for our fuel and current is a figure pretty much untethered from reality.

"One value of an international commitment" by the G20 to phase out such subsidies, Barrett told me, "is that it makes credible a promise by a government to get rid of the subsides.  But we need more than a statement; we need specifics, oversight, transparency, verification."